The Securities and Exchange Commission (SEC) is ramping up enforcement efforts this September, continuing its focus on off-channel communication violations (SMS or text messaging in this case). Recently, the SEC charged 12 municipal advisory firms for failing to maintain and preserve proper records of electronic communications, resulting in more than $1.3 million in combined fines.
This crackdown is part of the SEC’s ongoing efforts to enforce recordkeeping rules, a trend that began with high-profile fines in 2022.
These violations typically involve:
-
-
-
- Failing to preserve business-related communications.
- Staff, including senior employees and supervisors, using unapproved channels like text messaging (this includes texting, iMessage, etc.).
- Non-compliant communications taking place internally and externally, often bypassing company compliance policies.
-
-
Although the firms had compliance policies in place, employees, and the people charged with supervising them, were found using unauthorized communication platforms. In some cases, they falsely self-certified that they were complying with company policies, highlighting flaws in attestation-based compliance systems. The SEC noted that many firms failed to review, test, or modify their reliance on these employee certifications.
Compliance Warning:
The SEC emphasized the need for stronger supervision and better compliance procedures, urging firms to review their recordkeeping practices and avoid off-channel communication violations. With over $3 billion in penalties issued for recordkeeping violations and compliance technology readily available, the SEC has made it clear that firms continuing to make these mistakes will face serious consequences. Firms are also encouraged to self-report potential violations to the SEC, which may result in lighter penalties.
While SMS and text messaging may seem like a convenient way to communicate quickly, the risks of violating SEC regulations far outweigh the benefits of using non-compliant channels. With the SEC issuing hefty penalties for recordkeeping violations, it’s clear that compliance should be a top priority for every firm.
If you’re concerned about potential off-channel communication risks or want to ensure your firm remains compliant, consider implementing secure business messaging solutions. These tools allow for fast, efficient communication while ensuring all messages—both internal and external—are properly documented and compliant with regulatory standards.
Don’t wait until it’s too late. If you have questions about your compliance procedures or are interested in exploring more secure communication options, contact us today to safeguard your firm’s future.